The California real estate industry is one of the most expansive in the country, if not the world. Many of its facets can be complex; however, one question that is straightforward is if a real estate license is legally required to sell a house. The answer is definitely “sort of” (we warned you about the nuances!). No, you do not need a license to sell your own home, but yes, you are required to possess a valid real estate license to sell someone else’s home. So if you want a career selling homes, then you’ll need to go through the formal process to become a realtor. But if your only concern is about your own property, then you’re in the clear. Sort of.
FSBO: The Basics
If you’re selling your home without the help of a real estate agents, your property is technically considered a For Sale by Owner (FSBO). In this case, FSBO sellers don’t need a real estate license. (Unless you wanted to act as a real estate agent for the buyer; which would be strange that your counterpart would not also choose to represent themself or have a dedicated buyer's agent). If you’re only representing yourself and not another party, then you’re exempt from the law.
The prospect of cutting out a listing agent’s ~2.5% commission from your take-home pay on a sale is certainly enticing. No one wants to pay that much money if they don’t think it is necessary. You should certainly look into that option, just make sure to learn about the downsides in addition to the upside. We’ve written our thoughts on FSBO in other posts; highlighting the risk involved and giving some guidance if you decide to pursue that route (FSBO listings generally sell for a much lower lower asking price).
Getting a License to Do FSBO Home Sales? The Worst of Both Worlds
There seems to be an idea floating around that a good way to bridge the knowledge gap inherent in an FSBO sale is to… get your own real estate license. The (ir)rationale being that acquiring a license will give you access to resources and information beyond the reach of the general public, along with a better understanding of the laws and regulations surrounding real estate transactions in California.
We strongly disagree with this advice. This is the “tepid tea” approach. (Some people like hot tea, some people cold cold tea…. But nobody likes it when you combine them to make tepid tea). Going through all of the trouble and time and costs of getting your real estate license in California (one of the more stringent states) totally offsets the savings sought by FSBO sellers. And if you aren’t going to actually maximize your savings, you’re better off hiring a rockstar real estate agent.
Hiring Real Estate Agents
More often than not the optimal option for most FSBO sellers is to enlist the services of an experienced agent. They will handle all aspects of the home sale including any necessary paperwork, sourcing appropriate offers, and navigating your sale successfully across the finish line.
While you will obviously have to compensate them for their efforts, which will reduce your savings on the final sale price, this still may be the most economical option. A veteran agent will know how to find the most lucrative offers for your house that vastly outweigh what you could “save” selling yourself. Paying 2.5% to a listing agent that sells your home for $1 million, or is willing to work for a flat fee, still puts way more money in your pocket than selling it yourself for $900,000. Even better, it will prevent you from entertaining ridiculous ideas like getting a real estate license yourself.
Conclusion
In California, the general rule is that if you’re selling your own home without using the services of a licensed real estate agent, you don’t need a real estate license. However, hiring a licensed professional may make the most sense for you, saving you substantial time and money. Ultimately, it’s important to perform your own research about any sale by owner and make sure that you understand all aspects before making any decisions, license or not.
Like this article? Share it with an FSBO seller that might have underestimated how much work realtors do in the selling process.
